Do apartments and new construction impact STR viability?

Question

I'm looking at my first STR in an area that is growing, with a LOT of new construction and new apartment buildings. Does this type of rapid growth in housing options have any negative impact on STRs?

Robin Simon · Answer

Its dependent on market, but in a general sense, it would at the least have some negative impact on valuation (increased supply)

John Underwood · Answer

Depends on your specific market, but it could.

I only buy in vacation destination areas and don't have any apartments anywhere near me.

Dave Stokley · Answer

There are a lot of companies out there taking on blocks of units in these new buildings to use as STRs, so it certainly has the potential to impact the market. On the other hand, as others have mentioned there's pretty widespread housing shortages and cities are getting wise to this and not offering tax abatements and other incentives for properties used as STRs. I think you just need to do more research and figure out if the new units are really competition or not.

Paul Sandhu · Answer

If the new construction is intended for LTR or owner occupied properties, there will not be any impact on STRs.

Carolyn Fuller · Answer

It totally depends upon the market but, in general, I think most urban markets around the country are experiencing a big housing crisis which is why there is so much new construction. Here in the Boston area our vacancy rate is below 1%! This leads to over the top monthly rents and bidding wars between prospective tenants. It also leads to a ton of new multifamily housing development.

The LTR vacancy rate seems to have little impact on the STR nightly rates but often does have an impact on a locales' STR regulations. If your locale is not regulated, it often leads to huge amounts of competition which drives down nightly rates. Before regulations went into effect in my city, I saw listings on Airbnb that were going for less than they would if they had been on the LTR market.

I list on the STR market during the summer and on the MTR market during the academic year. LTR rates have gone up so much in the last 12 months that MTR rates for fully furnished apartments in my area are less than annual lease rates for unfurnished apartments. It is a crazy world out there.

Do apartments and new construction impact STR viability?

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